A friend introduced me to a client, now he wants a 25% cut

If you're getting your full rate, let your friend enjoy marking up your services. Make sure he's paying you promptly though, not paying you after he waits for the final client to pay his invoice, so specify he's your client in the contract and that he's comfortable paying your invoices in a time frame you expect not dependent on the final client paying his invoice.

Maybe he will bring you other engagements, you could even outline this in your contract with him that he will actively market you to his network.

Finding projects isn't trivial, it's mainly relationships and who you know. If he can keep bringing you projects I'd enjoy the ride.

Maybe let him know that for future engagements like this you're increasing your rate if you think you need to increase it.

If he's the one managing the relationship, doing the end-customer billing, it's perfectly normal to have a markup, especially if it's for a short-term engagement. He owns the relationship and is subcontracting you to perform your service. A referral fee would be appropriate if he was handing the customer off to you for direct billing and leaving you to manage your relationship directly. In essence, he's also warranting your work (which means he's bearing risk). Don't be so quick to say that this means you should raise your rates. If you did, he might not sub work out to you anymore and you'd lose the advantage of having people like him finding you work (which is a cost you'd need to bear). We have worked with subcontractors like this where they see us marking up their service and think they should raise their rates to what we're billing. That's the wrong response, because I can't then mark that up further. It just means we're going to find someone else to do the work for the rate we need. Ultimately, maybe it would be good to consider a higher bill rate for direct engagements and a lower bill rate for subcontracting jobs, and in the meantime try and move more of your business into direct engagements. But again, this takes work and will cost you, but at least you derisk the approach by continuing to get business (and build reputation) through subcontracting.

I have built two successful consulting groups, while some people here are saying 25% cut is normal that is astronomical in my experience for what he is providing. I would never agree to that rate just for an introduction, 8-12% is more reasonable for an intro and payable only when the client pays their invoice.

If your friend is doing some work and on-going management or something than that's a different story and this may all be very fair. But if he is literally just making an intro and then now saying you have to sub-contract from him that is odd to me and for me and has red flags all over the place. Essentially it seems like he wants to control the client relationship and just have you do the work, there are a lot of potential downfalls here. For example, if you aren't talking directly to the client and instead he is playing middle man you may get a bad wrap from the client because your friend doesn't understand something properly. That client then talks to other potential clients and next thing you know you are taking a hit for your friends behavior. If he is letting you have direct access to the client and he literally is just billing, his 25% is insane. Other downfall is if you don't control the client relationship how are change requests going to go? Is he going to properly represent them? How is billing going to be handled, they pay him net 30 and you wait again to get paid so you now risk 45-60 days of non-payment? Is his company big enough you can feel confident he'll pay you timely and properly? If things go south, is his company large enough to compensate or protect you during a legal suit? Is he carrying all the proper insurance? This just has so many red flags to me.

Essentially IMO your friend is taking advantage of you by introducing you to a client he knows (maybe does business with regularly) and he knowing you charge too little is jacking your rate to something more reasonable and taking the difference. With friends like that you don't need any enemies for sure. I usually introduce friends to clients for free because it is good business to make sure clients stay happy and my friends find work. Plus if a friend fucks up I am not on the hook for their screw up, just for the intro which I can manage around. For people I don't know or that are just acquittances, I'll do intros but I do take a referral fee paid as they are paid from the client. Only time I take money for an intro when a friend is involved is if I need to get involved or the value of the contract would be such they can afford to pay a fair referral, but I'd never ask for 1/4 of the value even if I told them to charge 1.25x more.

Don't compare to staffing agencies, that isn't an accurate representation unless that is the business your friend is in.

Consultant here. 20% cut is pretty normal. 25% is a bit high, but not excessive.

Also, no, recruiters often don't charge a one-time fee anymore - they will often get an initial fee plus a percentage of the employee's salary if they stay for a full year.

To your next point, what you're describing about going direct to the client is not only likely a breach of contract, but also generally a dick move. If you want to get 100% of billable with no sales/subcontracting commission, find your own client.

Your standard rate does not include the overhead created by the more complex relationships. Your standard rate doesn’t apply a discount for the lower probability of future work when you don’t own the client relationship. Your standard rate does not include a risk premium for the increased chance of payment problems, law suits, and misunderstandings.

If you think it’s bullshit, then it’s costing you. Here you are on HN fooling with “the deal” instead of doing billable work. And it’s just the honeymoon.

It takes a while to learn to trust your gut. It takes a while to learn avoiding bad projects is important.

If your friend can find someone else should you take a pass, then your friend can find someone else for the client’s next project, too.

My gut is “the deal” isn’t in the client’s interest. But I could be wrong. The test is your friend getting the client to sign a contract paying 25% of whatever the client pays you. That’s the test of a win-win-win.

Good luck.

In my market, most consultants bill the customer directly and pay 20% of the first 2 years to each other as finding fee for introducing a new customer.

When they subcontract in the fashion you suggest, it is more about keeping the relationship and looking like more of a one stop shop. It's really not a good way for them in terms of numbers and responsibility.

I would raise my prices on future business to 1.25x or try 1.5x given the indication the market supports it, and so I could pay fees and costs of finding new customers from my standard rates.

I would look to negotiate something that would work in future business in both directions (assuming your friend also does some consulting) making it clear that the more the deal looks like subcontracting the more likely it is a one off deal.

Everything is fair in business. Your friend has a right to ask you for whatever cut he thinks is reasonable. You have the right to negotiate that. It is simple. But make sure you don't undercut/undermine your friend. I would just say "Hey 25% is a bit high and I would like to give you x% instead".

You may now think that your friend is not really adding a lot of value by a simple introduction but if he had not introduced you to the client who probably are going with you due to the referral, you would make $0. That is how business works. Referral and Networks is the key and try not to burn bridges with anyone.

Consultant here, some data points:

30+ years experience, consulting prob 10+ years

If they are paying you on a timely basis (not waiting until they get paid, pay you even they don’t get paid). * Yes, OK even if they take up to 100%+

Intro and nothing else: I try to give these away. Your “friend” is trying to exploit you in my view.

Intro and nothing else: If he won’t let me take nothing. (He’s stretched or otherwise needs financial help) I’d give him 20%.

I've done an 80% cut from someone who intro'ed me to a major telco. Sometimes the value of the job is not just the money, but also the connections. He charged them a ludicrous price, but also paid me well.

It depends a lot on his role. I'd be happy to pay up to 50% to someone who acts as a full time agent, dealing with negotiations, client filtering, writing and proofreading contracts, harassing them for payment. They have to eat too. Unfortunately, most people who take this role don't do it very well.

But as a pure referral fee, 10% seems fair.

While you could increase your rate, I feel it's fair as your friend company is billing his client for the entire period. For me it feel like your are employed by your friend company. 1.25x is really low then. If he just introduced you to the client then it's not his company who should bill the client but yours. In this case it's your client and your friend just get a commission, 25% seems then pretty high. I usually give 15%. But what I understand is that the business relationship is between the client and your friend, it's not your client.

I think that his cut is about normal, I have heard of higher and lower. Both short and long term...

I think you are going for a world of hurt, if you try to cut him out later.

My advise, in the contract with your friend make sure, that HE is listed as your customer (and not the end customer) and hence that HE has to pay you regardless of what the end customer does (i.e. he cannot say "I didn't get paid, so neither will you"). If he barks, then you have some room for negotiation...

Also for a long term engagement 25% is a rather cheap sale (which is even free (in monetary terms) for you)!

I did something like this once and was able to have the middleman pay me upon customer acceptance of the time card. I benefited from not having to deal with the receivable. There was also the ability to push off business issues to the middleman and avoid mixing money with the technical work — which was hard for me at that stage of my career.

If you think this may turn into longer term work, negotiate a compromise. Maybe you pay your friend for a year, for a particular project, or something similar.

I don’t understand why you care if you are Still getting full billing? E.g. list is $100/hr and you are still getting $100/hr net...

I give a 25% referral fee standard and bake it in on the backend. Value based projects have plenty of "margin" where I am happy to share the profit. That business wouldn't have happened otherwise.

Does his company regularly practice "finder" services?

Your friend is in the wrong here for not discussing terms up front. Maybe an honest mistake by him. Tell him whatever you’re comfortable with and walk otherwise. But this “friendship” is likely over regardless of the outcome.

If he's marking up by 1.25x, he's actually only taking 20% of the total (0.25, his cut, divided by 1.25, the total charged, is 20%). Dunno, it's probably not too bad. And it is his client after all...

Value depends on the user, and the ones that benefit from the arrangement imho. Counter offer with something lower? Make sure contracts are signed when an agreement is made.

I have a hard time understanding how does his rate affect exactly your situation.

how much time have you wasted thinking about this? Is it worth it? after over 20 yrs of being independent, any engagement that starts out with drama will end in drama.